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Michigan Wants to Close Accidental Auto Industry Tax Credit

Last year, Michigan accidentally handed the auto industry almost $60 million in tax credits. Now, Governor Snyder and legislators are trying to fix the error, but the auto industry is fighting back, trying to hold on to its profits.

No one in the Michigan legislature thought its 2012 law was going to affect taxes. The law shifted administration of Michigan’s assigned claims from the Secretary of State to the Michigan Auto Insurance Placement Facility. But that one small change has left Michigan with a budget shortfall it didn’t expect.

Michigan Assigned Claims Plan

Michigan’s no-fault law makes sure no one falls through the cracks. If you are injured by an uninsured motorist and don’t have any other policy available to you, you can have your medical expenses, lost wages, and other qualified expenses covered by the Michigan Assigned Claims Plan.

From 1973 until 2012, that plan was administrated by the Secretary of State’s office. But in 2012, lawmakers changed the law, hoping to improve efficiency by shifting assigned claims to and industry-run placement facility.

Accidental Tax Credit

The switch put insurance companies in charge of the plan. But because insurers receive a tax credit for payments to the group, that shift entitled them to credits for a quarter of $239 million in assigned claims paid out in 2015.  That’s almost $60 million in tax revenue the State of Michigan didn’t get.

With the current funding crisis in Flint and Detroit Public Schools, that was a loss Governor Snyder couldn’t ignore. He called on the Michigan legislature to correct the error and close the tax credit loophole for the 2016-2017 fiscal year. State Representative Al Pscholka, of Stevensville, is the chair of the Committee on Appropriations. He told the Detroit Free Press that repealing the credit fixes a problem created by a past Legislature:

“This was a mistake made back in 2012. . . . We shouldn’t have Hollywood-style tax credits for the insurance industry.”

He has sponsored a bill to correct the error by eliminating the tax credit.

Auto Industry Threatens Policy Rate Hikes

The auto industry is working hard to stop the bill and keep its newly found profits. Bev Barney, Chief Executive Officer of the Michigan Association of Insurance Agents, threatened:

“If the credit is eliminated, it is the insuring public that will pay through higher auto insurance premiums.”

In other words, the auto industry plans to pass the amount it pays in taxes off to its customers, in a fee it is calling a “car tax.”

But Pscholka and others see through this threat. He said:

“My initial reaction is, ‘Well, where was my rate cut when you got [the tax credit]? I guess I missed it. Perhaps it’s still in the mail.'”

Don’t let the auto industry make profits at the expense of crucial state services. Contact your representative and tell them to repeal the accidental tax credits today.

David Christensen is an auto accident attorney at Christensen Law in Southfield, Michigan. If you have been in a serious auto accident, contact Christensen Law today for a free consultation.